Life Insurance
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Large life insurance payouts can affect the size of your estate — and subsequently, the resulting estate taxes. Your heirs don't pay income tax on the insurance payout they receive when you die; but taxes will be due if the death benefit pushes the size of your estate above the estate tax exemption amount.
You also may want to consider a second-to-die insurance policy, which covers both you and your spouse. It pays nothing until the second one of you dies. The payout can then be used to pay estate taxes that are due. This arrangement is usually more appropriate for those with estates of more than twice the tax-free limit.
Please consult your tax professional for more information.
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